Agriculture has always been the backbone of most rural economies. Nico Groenewald, Head of Agribusiness SA at Standard Bank, encourages primary producers to take a long-term view, rather than getting caught up in the immediate crisis of the country’s worst drought in 80 years. It’s time for farmers to view agriculture as an investment vehicle.

All of us in agriculture know that it is a cyclical sector, and that weather is a fundamental, but unpredictable, factor for which we must continuously evolve better strategies. Agriculture is also the one sector that is critical to human survival. However, partly because of the weather, and often in spite of it, the ways of ensuring that people get good quality, nourishing food are evolving.

So, if you’re in agriculture, you’re a contributor to one of the most profound evolutions to ever influence humanity’s future. This is not just a financial consideration; it also has immense social implications. It will shift agriculture into the domain of social investment, whereby people invest not only for financial returns, but also to ensure that society functions more equitably as a result of their inputs.

For all sorts of reasons, therefore, it’s time for farmers to look at the work they do as a type of investment vehicle.

New agricultural strategies are giving rise to new up- and downstream business opportunities in which conventional investors can be persuaded to take a stake. Farmers can either create the investment opportunities, or participate in them. Regardless, they gain a share of the value chain that they don’t currently have. It also enables them to influence the direction in which agriculture evolves, and how effectively it serves both farmers and humanity.

For most farmers, with or without drought conditions, funding remains a challenge. Again, the solution lies in looking at agriculture as an investment vehicle, rather than as a purely tactical, operational exercise undertaken season-on-season. In an investment scenario, banks and their relationship managers and agricultural economists can be significant allies.

They can bring more effective and longer-term funding resources to bear as agriculture becomes more globalised.

Since the establishment of the world’s oldest bank in Italy, agriculture has owed most of its operations to loans made available by banks, on the basis of a statute regulating agricultural and pastoral activities in the respective region.

Consequently, modern funding trends driven largely by technology and new phenomena, such as crowd sourcing and crowd funding, are making other financing options available to players in the agricultural value chain.

Farmers, who want to take the investment approach, should stick to the basics of financing as proven by banks. Additionally to actual funding, banks with agricultural business units provide ancillary services that can help farmers achieve a competitive advantage and mitigate their risks.